'Hollywood is being run out of Miami': How MoviePass is conquering cinema

Ted Farnswoth, the Miami-based CEO of the parent company of MoviePass, has been guiding the hot app through its ups and downs. Nick Garcia

Hollywood is set for its biggest box office weekend of the year as Disney and Marvel Studios release "Avengers: Infinity War" on Friday.

Its success will likely get a boost from a movie-ticket subscription service called MoviePass, which allows existing users to pay a flat monthly fee of $9.95 to see a movie a day at most major theaters. New users face tighter restrictions.

MoviePass has quickly become one of the most talked-about services in both Hollywood and on Wall Street as debate rages about the future of moviegoing.

And until recently, MoviePass's parent company, Helios and Matheson Analytics Inc., was partially headquartered at a co-working space on South Beach. It has now moved to a larger office in Brickell. Most of Helios' and MoviePass' employees work in New York.

"I think it’s a riot that Hollywood is being run out of Miami," said Helios CEO Ted Farnsworth.

U.S. movie attendance continues to shrink as more people opt to watch movies at home via services like Netflix and HBO. Increasingly, Hollywood studios are relying on blockbusters to drive sales, leaving small and mid-budget projects in limbo. That in turn is affecting movie theaters, which are spending millions to upgrade their facilities to offer a premium experience.

Enter MoviePass. The company founded by two entrepreneurs in 2011 initially charged between $15 and $50 a month for a run of movies at participating theaters.

In 2016, Helios merged with Farnsworth's Miami-based tech company, Zone. At the time, Zone was based at WeWork's Lincoln Road space.

Farnsworth, a tech entrepreneur and longtime Miami resident, was named CEO. He began strategic acquisitions that would make Helios' product lineup more attractive. He immediately seized on MoviePass, hoping to capitalize on the monthly subscription-service wave (think Netflix and Spotify).

Last year, Farnsworth decided to lower MoviePass's price to $9.95 to boost growth.

The new price launched MoviePass into the stratosphere. Between last August and this January, MoviePass said its subscribers grew by more than 6,500 percent. In February, MoviePass announced subscriptions had surpassed 2 million. Farnsworth said he now expects to reach 5 to 6 million users by the end of 2018.

Today, MoviePass is an object of obsession in the film industry. Just this week, the Hollywood Reporter asked, "Is MoviePass Hollywood's Future or Just 'Too Good to Be True'?" noting that MoviePass was the elephant in the bedroom at this week's CinemaCon conference.

"Its 2 million customers (and growing) are impossible to ignore," the publication said.

At the same time, questions have been raised about MoviePass' and its parent company's long-term financial prospects. For fiscal 2017, Helios reported a $150.8 million loss, compared with a $7.4 million loss in 2016. Farnsoworth attributes the slide to Helios' finalizing its acquisition of MoviePass. An outside audit first noted by Business Insiderindicated "substantial doubt" about the company’s ability to stay in business. Farnsworth dismisses the language as boilerplate in an annual report. Helios' stock price has continued to fluctuate. Verizon recently disclosed it had invested in Helios.

Rich Greenfield, media analyst at Wall Street firm BTIG, said it remains to be seen whether studios and movie theaters need, or even want, a company like MoviePass to prop up the film business. The service has been most useful in driving filmgoers to less-advertised fare, he said.

To remain viable, MoviePass will have to simultaneously deliver break-neck user growth and show that it is altering moviegoer behavior in Hollywood gatekeepers' favor.

"For [the MoviePass] model to work you need scale, and in order to scale you need to gain negotiating leverage relative to exhibitors," he said. "MoviePass is going to need tremendous scale."

MoviePass has at least one favorable poll in its pocket showing its impact on moviegoing. A Hollywood Reporter survey found that MoviePass subscribers were taking six more trips to the cinema than nonsubscribers and were twice as likely to see a movie on opening weekend. In addition, nearly half of MoviePass customers said they would now be more willing to see a movie by themselves, and 42 percent said they'd catch a flick midweek.

"I think MoviePass has to be considered one of the better things to happen to the movie industry in quite some time," said Jeff Lowe, host of the popular movie podcast Lights Camera Podcast, in an email. "Obviously, the theater companies don't seem to be big fans, but ever since MoviePass lowered their prices, I have seen my local theater as packed as ever."

Farnsworth says MoviePass is operating on an Amazon-like model, focusing on capturing as many users as possible. The company is continuing to make investments: It recently purchased venerable cinephile mainstay MovieFone to gain access to more moviegoer data. And MoviePass just bought a stake in the upcoming John Gotti biopic starring John Travolta through the indie financing arm it created in January.

He also emphasizes that the company now has a huge dataset of moviegoer habits, one that rivals whatever sets film companies and even theaters currently possess.

"We can now target a film's advertising better than it could have ever been done before," Farnsworth said.

As for Miami, the company's presence here will continue to grow as long as the company continues to do so, Farnsworth said. A spokesperson said Mitch Lowe, who oversees MoviePass, will be spending more time in the Magic City, and that the company is looking to expand into Latin America.